Petrel Resources Regulatory News (PET)

27 Sep 2006 07:00

Petrel Resources PLC27 September 2006 Petrel Resources plc Interim Results for the six month period to 30 June 2006 Since Petrel first entered Iraq in 1999, our strategy has been simple - todevelop an upstream presence in one of the great oil provinces of the world.Today that strategy is unaltered. During a period when reports from the Middle East are almost universallynegative, Petrel has continued to make progress. We carry on early stage workon the Subba and Luhais oil field development, we commenced a technicalcooperation agreement with the Iraqi Oil Ministry to evaluate the Merjan oilfield in West Central Iraq, we continued discussions with the authorities on thestatus of Block 6 in the Western desert and we agreed terms of a ProductionSharing Agreement with the Jordanian authorities on the East Safawi hydrocarbonblock near the Iraqi border. On the corporate side, we signed a cooperationagreement with Itochu of Japan, while our joint venture with the Makman Group inIraq, first announced in December 2005, is developing well. Passing a new hydrocarbon law will be a major step for Iraq toward thedevelopment of their world class discoveries. News on this front is positivewith ministerial statements that the new law will be approved by the end of2006. Oil Field Development Contract: Subba and Luhais Petrel is developing the Subba and Luhais oil fields in southern Iraq inpartnership with the Iraqi Makman Group as part of an Engineering, Procurementand Supervision of Construction (EPC) Contract awarded by the Iraqi Ministry ofOil. Work is proceeding as planned. No insurmountable security challenges havebeen encountered. The Basic Design Package for the facilities is now being submitted and reviewedby the Iraqi Ministry of Oil's Project Company (SCOP). We anticipate theirformal acceptance of the Basic Design shortly, which triggers our correspondingreceipt of the second milestone payment from SCOP. This will enable us tocommence the more extensive Detailed Design for the whole project with ourContractor, Enereco in Italy. Overall progress for the project is on schedule. We are now entering into theprocurement phase of the project with the assistance of our joint venturepartner Makman. They have procured and supplied similar equipment for theKhurmala and Hamrin Projects in Iraq. We have also secured delivery of the 18 compressor units from GE/Thermodyne(France). Manufacturing has now commenced with phased deliveries to start in the3rd Qtr of 2007. This is a major value order and a significant event in theproject as the deliveries will also provide the Iraqi Ministry of Oil with thecapability to commence early gas export from the Luhais Plant. We are now focusing on securing deliveries for the pipelines. Discussions areongoing with international suppliers both in Europe and Japan. A survey team isshortly to be mobilised to carry out the work necessary for the plant processinglocations, power and communication routings, and the pipeline rights of way. We are also developing our relationship with the Trade Bank of Iraq (TBI) and amajor international bank for opening of the necessary bank accounts and tosecure and issue the necessary project letters of credit. These relationshipshave provided security for our receipts from SCOP and for issuing of letters ofcredit to the suppliers for the plant equipment. The project is going well and our offices in Europe, Turkey & Iraq are allmobilised and active. The project provides us with valuable experience workingwith the Iraqi Ministry of Oil for the development of large scale oil and gasprocessing plant and export systems. The knowledge gained will be fullyutilised and applied in our future work in Iraq. Oil Exploration: Merjan Oil Field A Technical Cooperation Agreement with the Iraqi Ministry of Oil on the Merjanoilfield in west-central Iraq formally began in May 2006. The project isproceeding on schedule and is due to be completed by the end of 2006. Theavailable seismic data has been re-processed and interpretation is welladvanced. Petrophysical studies and reservoir analysis have been initiated. TheMerjan-1 well was drilled in 1983 and discovered oil in the Upper CretaceousHartha Formation, with circa 760 million barrels of oil in place. The field wasnot developed in the intervening period because of political factors. In tandem with the Technical Cooperation Agreement, Petrel and its contractorsare working closely with the Iraqi Ministry of Oil on specialised technicaltraining efforts, especially in geophysics and geology. Jordanian Exploration: East Safawi Block Petrel has agreed PSA terms with the Natural Resources Authority of theJordanian Government on the East Safawi Block, close to the Iraqi border. Theratification process is underway and the Jordanian Parliament is expected toconsider the proposed PSA over the coming months. ITOCHU Partnership Petrel Resources has a strategic partnership and cooperation agreement withITOCHU Corporation of Japan ("ITOCHU"). The strategic partnership will coverfuture exploration and development activities in the Iraqi oil and gas industry. We have worked with ITOCHU over several years. ITOCHU with its strong balancesheet and long-term perspective, is a strong player in upstream oil and gasbusiness. The strategic partnership will expand and deepen our operationalcapabilities. There is no better partner for us in our quest to expand anddeepen our Iraqi activities. ITOCHU launched its upstream activities in Indonesia and Sakhalin Island in the1970s and has been a successful player in the upstream energy sector. It iscurrently active in Algeria, Azerbaijan, as well as oil producing regions in theNorth Sea and Western Australia. In addition to the above-mentioned upstreamactivities, the ITOCHU group is also one of the largest traders of crude oil inthe Far East. It is a major force in numerous business sectors, including steelpipe supply, finance and logistics The cooperation agreement between Petrel and ITOCHU will initially cover work onthe Merjan oil field. ITOCHU will also have a first look at future Petrelprojects in the Iraqi oil and gas upstream sector. ITOCHU will contributetowards Petrel's historic costs in the Iraqi oil and gas sector and will cover afixed share of the costs of the current study. This joint venture is a good fit for Petrel in Iraq. Itochu is financiallystrong and has capabilities in multiple business sectors, and will contribute toour quest to expand and deepen our Iraqi interests. Next steps The elected, sovereign Iraqi government is finalising a hydrocarbon law whichwill cover upstream as well as downstream investments. The structure forexploration and development is expected to be the industry's preferred 'Production Sharing Agreement'. This will open some of the world's largest andmost attractive oil fields and exploration areas to those internationalcompanies prepared to work on the ground in Iraq. We have shown our ability to operate in Iraq in the last seven years, ourcommitment is long term and I believe that we are well placed to play a part inthe development of the Iraqi oil industry. John Teeling Chairman 27th September 2006 For further information please contact:Petrel Resources Plc David Horgan + 353 87 292 3500John Teeling +353 1 833 2833Corporate Synergy Ian Rice +44 (0) 117 933 0020Craig Howie +44 (0) 20 7448 4400 www.petrelresources.com Petrel Resources PLC Financial Information (Unaudited) Six Months Ended 30.06.06 30.06.05 •'000 •'000Group Profit and LossOperating Loss (227) (245)Investment Income 19 1 Loss before Taxation (208) (244)Taxation - - Loss for the period (208) (244) Loss per share (.31c) (.40c) 30.06.06 30.06.05 •'000 •'000Group Balance SheetFixed Assets 4,169 2,597 Current AssetsContract Work in Progress 1,716 -Debtors 28 83Bank 9,378 712 11,122 795Current LiabilitiesContract Advance Payment (7,568) -Creditors (171) (219) (7,739) (219) Current Assets less Current Liabilities 3,383 576 7,552 3,173 Share Capital and Reserves 7,552 3,173 Six Months Ended 30.06.06 30.06.05 •'000 •'000Group Cash FlowNet Cash Inflow from Operating Activities 5,143 (223)Returns on Investments and Servicing of Finance 19 1Capital Expenditure (305) (378)Financing - Issue of Ordinary Share Capital 792 1,309 Increase in Cash 5,649 709 Notes: 1. The figures for the six months to 30 June 2006 and 30 June 2005 areunaudited. The financial information set out above does not constitute fullstatutory accounts within the meaning of section 240 of the Companies Act 1985. 2. Copies of this announcement will be sent to shareholders and will beavailable for inspection at the Company's registered office at 162 ClontarfRoad, Dublin 3, Ireland. This information is provided by RNS The company news service from the London Stock Exchange